Chapters 5, 18

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School

University of Toronto St. George

Department

Rotman Commerce

Course

RSM100Y1

Professor

Michael Szlachta

Semester

Winter

Description

Chapter 5 J Understanding International Business Globalization is when more and more firms begin to engage in international business, thus making the world economy single interdependent system. Governments and businesses have become aware of the benefits of globalization for their countries and stockholders. New technology also have made international travel, communication and commerce; easier, faster and cheaper. Globalization is not without its critics, who charge that it allows businesses to exploit workers in less developed nations and bypass domestic environmental and tax regulations An absolute advantage ]ZL]}L[Z]o]}produce a good more cheaply and better than any other country (e.g. Canadian timber, Saudi oil, Brazilian coffee beans). A comparative advantage ]ZL]}L[Z]o]}produce a good more cheaply or better than others. For example, if a business in a given country can make computers more efficiency than it can make automobiles, the business has a comparative advantage in making computers. National Competitive Advantage: A country will be inclined to engage in international businesses when 4 certain conditions are favourable; - Factor conditions - factors of production; labour, capital, entrepreneurs and natural resources - Demand conditions - must contain large domestic consumer base that promotes strong demand for innovative products - Related and supporting industries - includes strong local or regional suppliers andor industrial customers - Strategies, structures, and rivalries J firms that stress cost reduction, product quality, higher productivity and innovative new products When the following conditions are met a nation will naturally engage in international business }L[Zbalance of trade is the difference in the total o}L]}L[Z total exports and imports. The balance of payments is the flow of money into and out of a country. For example, this can include the money spent by tourist, money spent or received in exchanging currency, exportimport, and earnings from foreign investments. Exchange Rates and Competition Companies participating in international trade must watch exchange rate fluctuations closely because changes can affect the overall demand overseas for their product and can be a major factor ]L]LL]}Lo }K]]}L:JZL }L[Z L ]ZZ7 }KL]Z]L]K} difficult to export their products to the foreign market, and it becomes easier for foreign companies to enter the local market. This usually makes larger domestic companies to move their production operations to lower-cost sites in foreign countries. www.notesolution.com